ATO data analysis detects false tax claims
ATO data analysis and data matching means false tax claims are far more easily detected than ever before, according to Porters Chartered Accountants, Albany manager, Jodi Bradley
“If you earn an income, you pay tax. There are legitimate deductions you can make to reduce your tax bill or receive a return, there are also many misconceptions about what constitutes a legitimate deduction,” she said
A tax agent uses the information you provide to prepare your return for lodgement.
ATO assistant commissioner Kath Anderson said one of the myths encountered by the ATO is that taxpayers believe tax agents will take responsibility for their clients’ claims.
“Whether you prepare your own return or you use an agent, you are ultimately responsible for ensuring your claims are correct,” Ms Anderson said.
“Even if you use a tax agent, you are ultimately responsible for ensuring the information in your return, including the deductions you claim, is correct. You cannot transfer that responsibility to your agent so make sure you give them complete and accurate information.”
Ms Bradley explained, “As tax agents, we help clients execute a tax plan that allows you to minimise your taxes within the limit of the law. Every tax return that we lodge is appropriately reviewed and is considered ready to face ATO scrutiny should this arise. To lodge a return we require that clients provide us with correct financial records and accurate bookkeeping. An accountant can only work with the information provided by the client. If we believe information is inconsistent or incorrect, we will address this with our client before we are able to lodge a return.”
Tax myths may begin as hearsay and a global desire to reduce our tax. Many misconceptions are also made on the back of tantalising news articles in the lead up to 30 June. This year the big news was that products such as sunscreen and make-up containing sunscreen were deductible.
While some items are claimable for a small number of taxpayers it is a myth that the majority can claim, Ms Anderson said.
“There are only a handful of taxpayers with special circumstances who can claim things like gym memberships or make-up containing sunscreen. For most, there isn’t a link to earning their income.”
Topping the list of false claims is the assumption that everyone is entitled to a “standard deduction” of $150 for laundry, 5,000 kilometres for cars or $300 for work-related expenses.
According to ATO regulation, while you don’t need receipts for claims under $300 for work related expenses, $150 for laundry and 5,000 kilometres, you must still have spent the money. It must be related to earning your income, and you must be able to explain how you calculated your claim.
As the work environment changes and more people work remotely or from home, new tax claim myths are emerging.
Ms Anderson says the ATO is becoming concerned about taxpayers claiming their entire Foxtel or Netflix subscriptions or phone bill, on the basis that some part relates to earning their income. If you don’t work from home, then obviously home office expenses will not be claimable
Claims must be proportionate to associated business use.
Among the top ten false claims are home to work car trips; claiming plain clothes worn for work; claiming hair, clothes and makeup for work events, and holiday travel expenses when only a few days are in relation to a conference or work.
“We have clients whose jobs require outfits for balls and themed social events. We have looked into this at length. No matter how much a client wishes to make a claim as the event is work related, the law states otherwise,” Ms Bradley said.
“Often clients lament, but my friend’s accountant says they can claim… The reality is there is tax law and it is heavily regulated. ATO scrutiny is increasing. With new technology the ATO can identify discrepancies far more easily thus increasing your risk of audit if you make a false claim.
“If your accountant is prepared to claim deductions that other accountants will not, you need to ask yourself, ‘why?’”
Making those false claims will increase your risk of audit. If your books are audited, all records must be available for assessment. This draws to light another popular myth of record keeping. Bank or credit card statements cannot be used in place of a receipt. Bank statements provide insufficient detail to substantiate a claim. Claims must be supported by receipts or invoices.
Get advice. Don’t just go with an accountant who will claim what you want to claim. Provide accurate information and legitimate invoices and receipts so your accountant can prepare your return within the limit of the law. You are ultimately responsible if false claims are made.
THINGS YOU PROBABLY CAN’T CLAIM
- Trips between home and work – unless carrying bulky work-related goods
- Car expenses that have been salary sacrificed
- Meal expenses for travel unless you were required to work away from home overnight.
- Private travel or private transport of bulky goods or equipment
- Everyday clothes to wear to work – such as a suit or black pants – even if your employer requires you to wear them
- Deductions for cleaning eligible work clothes without showing how you calculated the cost
- Higher education contributions charged through the HELP scheme
- Self-education expenses if the study is not connected with your current job
- Private use of phone or internet
- Upfront deductions for tools and equipment costing more than $300 each. These must be depreciated over time